Answers

How do I apply for financial aid?

The first step in applying for any type of financial aid is to complete the Free Application for Federal Student Aid (FAFSA). You can submit the FAFSA online by going to http://www.fafsa.ed.gov. Once this form is processed, you will receive either a paper student aid report (SAR) from the U.S. Department of Education or if you provided a valid email address, you will receive a SAR through e-mail. The SAR will contain your expected family contribution (EFC), which is the amount your family is expected to contribute toward your education. The school(s) that you listed on the FAFSA should also receive this information electronically. The financial aid office will then use it to award you an aid package. This package may include a mix of grants, loans, and other types of aid, depending on your eligibility. In this package, the school will indicate whether you are eligible to receive the federal Direct loan. If you are eligible, the school will certify a loan amount for you and provide you with any additional instructions needed for completing the Master Promissory Note (MPN).

What are the eligibility criteria for obtaining federal financial aid?

In order to apply for financial aid, students must first complete the Free Application For Federal Student Aid (FAFSA). Once the school receives this information via the student aid report (SAR), it can then determine which types of financial aid (including federal loans) students are eligible to receive. The school will send award notifications to students along with instructions about how to apply.

Some of the qualifications for federal financial aid include the following. You must:

Have financial need (except in the case of unsubsidized student loans);

Have a high school diploma or a General Education Development (GED) certificate or meet standards approved by the U.S. Department of Education;

Be enrolled as a regular student working toward a degree or certificate in an eligible program;

Be a U.S. citizen or eligible non-citizen;

Have a valid Social Security Number;

Make satisfactory academic progress;

Sign a statement of educational purpose/certification statement on refunds and default (found on the SAR);

Sign a statement of updated information, if required (found on the SAR); and

Register with the Selective Service, if required.

Students should contact their financial aid offices directly if there are any questions about the different types of financial aid offered to them by their schools.

Campus-based aid programs are administered directly by the financial aid office at participating schools. Not all schools are involved with all three programs. The Federal Supplemental Educational Opportunity Grant (FSEOG) Program awards grants, the Federal Work-Study (FWS) Program offers jobs, and the Federal Perkins Loan (Perkins) Program offers loans. Each participating school receives a limited amount of funds for these programs, so make sure to apply by completing the FAFSA as soon after January 1 as possible!

What if my income (or my parents' income) changes significantly after I apply for financial aid?

A financial aid administrator may use professional judgment to adjust the data used in determining a student's expected family contribution (EFC), if extenuating family circumstances may cause the data to yield an EFC that wouldn't accurately reflect the family's ability to contribute to the student's education. You should discuss the change in your circumstances with the financial aid office at your school to see if the EFC can be altered.

Loan consolidation is an option that most student loan borrowers consider at some point over the life of their loans. And while the reasons why a borrower may choose to consolidate vary, most borrowers consolidate in order to:

Combine multiple loan balances under a single lender, so that the borrower has to make only one monthly payment; and/or

Lock in a fixed interest rate for the entire repayment period of the loan.

Remember, however, that you are not required to consolidate your loans. It is a decision that you should consider seriously. A borrower seeking a Consolidation loan can consolidate several different types of federal education loans. The types of loans that you may include in a Consolidation loan are:

Note: There may be disadvantages to including a Perkins loan in a Consolidation loan. Learn more here: Consolidation loan FAQs.

In order to qualify for a federal Consolidation loan, you must be in your grace period or have entered repayment on each loan that is selected for consolidation.

Note: Effective July 1, 2006, a borrower may no longer request to enter repayment on a Stafford loan while still enrolled in school in order for the borrower to consolidate those loans.

What does default on a student loan mean?

When a borrower is 270 days or more delinquent in making payments on a student loan, the borrower is considered to be in default. Once a borrower is in default, the lender or servicer can request immediate payment in full. Default can have a long lasting, negative effect on your financial future, incuding:

Administrative wage garnishment;

Assessment of collection costs;

Assignment of account to collection vendors;

Credit reporting;

Loss of financial aid eligibility;

Seizure of Texas lottery winnings;

Reimbursements (warrants) from the Texas State Comptroller may be withheld;

Suspension or denial of state licensing (including professional and handgun licensing);

Holds on transcripts and academic records; and

Seizure of any U.S. Treasury payments the borrower is due (including, but not limited to, the borrower's IRS tax refund).

To apply for a federal grant or state grant, complete the Free Application for Federal Student Aid (FAFSA). You can submit the FAFSA online. To find scholarships, visit AIE's Scholarship Search. Not all scholarship awards are determined by academic achievement. You should also contact the school you are interested in attending to see if you qualify for any aid it offers. You might find scholarships leads by checking with your local library, local paper, and civic and nonprofit organizations.

3 The borrower may receive less than the maximum if he or she receives other financial aid that is used to cover the cost of attendance. Keep in mind that the federal government will pay interest on only subsidized Direct loans while the student is in school.

What should I do if I cannot make a payment on my student loan?

First, contact your lender, servicer, or TG to discuss your situation. Your servicer will try to help you manage repayment.

As one option, you might consider a repayment plan that better fits your student loan debt, income, and family size. (See what you qualify for using this IBR calculator). Your servicer can guide you through applying for a different repayment plan.

You might also consider deferment or forbearance, which allow you to temporarily suspend your loan payments if you are enrolled in school at least half time, unemployed, or experiencing financial hardship. Certain members of the military may also qualify for a deferment. Learn more about deferment and forbearance.

You can also call TG's Default Prevention Department at (800) 338-4752 to discuss your situation and find out about alternative repayment schedules that might make it easier for you to afford your monthly payments.

What are the conditions for cancellation or discharge of a federal student loan?

The following conditions allow cancellation or discharge of Direct and FFEL Program loans (contact the loan holder for specific requirements):

Borrower's total and permanent disability or death

In case of PLUS loan borrowed on behalf of a dependent student, death of student

Closed School (before student could complete program of study) or False Loan Certification for loans received on or after January 1, 1986

What is the difference between a subsidized and unsubsidized Direct loan?

In the case of subsidized Direct loans, the government pays the interest on the loan that accrues during school, grace period, and authorized deferment periods. For unsubsidized Direct loans, you are responsible for paying all the interest that accrues over the life of an unsubsidized loan. You don't have to make interest payments while in school, but the interest amount will be added to the principal of the loan. This will increase the loan balance. It is a good idea to make the interest payments on an unsubsidized loan while enrolled in school, if possible.

Is it possible to have my loan payments automatically withdrawn from my bank account?

Yes. Most lenders and/or servicers do offer an autodraft of the monthly payment from your bank account. Contact your servicer to set this up.

Do I still need to make loan payments if my coupon booklet runs out?

Yes. Remember that you are financially responsible for your loan and timely payments are important not only to your lender/servicer, but to your credit history as well. If your coupon booklet runs out, request a new one by contacting your lender or servicer, but always keep the payment address on file and send your monthly payment regardless of whether or not you have payment coupons. Also, it is a good idea to include your account number on all payments made to your lender or servicer.

A federal Perkins loan is a low-interest (5 percent) loan for both undergraduate and graduate students with exceptional financial need as determined by the school's financial aid office. The school acts as the lender, and the students makes payments to it directly upon entering repayment. The loan is made using government funds with a share contributed directly by the school. You can find out more about this loan program and other types of campus-based aid on the U.S. Department of Education's Web site.

How much can I borrow in the Perkins loan program?

Depending on when you apply, your level of need, and the funding level of the school (remember to apply with the FAFSA early), you can borrow up to:

$5,500 for each year of undergraduate study. The total you can borrow as an undergraduate is $27,500.

$8,000 for each year of graduate or professional study. The total you can borrow as a graduate/professional student is $60,000. That includes any Perkins loans you borrowed as an undergraduate.

Federal regulations require your servicer to report information on each loan it makes or holds to at least one national credit bureau. Your servicer will report loan delinquencies to at least one credit reporting agency. This means you should be diligent about your loan payments. Paying on time can have a positive effect on your credit history. On the other hand, if you are negligent about keeping up with your monthly payment, it can harm your credit history and your ability to obtain credit in the future. Find out about the consequences of default.

The repayment period on a federal Direct loan begins no later than 60 days following the last day of the grace period. Your grace period lasts for six months and begins when you graduate or cease to be enrolled at least half time.

If I choose to use student loans to finance my higher education, what do I need to know?

Government-sponsored education loans are a good deal if you decide to borrow to pay for your education. They are generally better than traditional consumer loans because they offer can offer lower interest rates and better terms over all. However, there are eligibility requirements, primarily need. Whether or not you borrow to pay for your education is an important decision, and it is one only you and your family can make. A good education can cost you money, but it is worth the investment. As with any debt, you are responsible for repaying your loan -- in full -- even if you did not (as sometimes happens) complete school, or cannot get a job. If you do not make your monthly payments as scheduled -- and you do not make any special arrangements with your lender â€“ your loan may go delinquent or enter default, which carries significant consequences.

Information from your Free Application For Federal Student Aid (FAFSA) is used to calculate your expected family contribution (EFC), that is, what you and your family can pay toward your education. If your EFC is below a certain amount, you may qualify for a Federal Pell Grant. Your school subtracts your EFC from the school's cost of attendance, which includes tuition and fees, room and board, travel, books and supplies, and personal and miscellaneous expenses. The balance left over is your financial need. Your school will then put together a package of financial aid designed to help you meet that need.

If you borrow federal student loans, your school will track your academic progress from year to year. Satisfactory academic progress (SAP) is a federally required measure designed to make sure students who borrow graduate within a set time period with a minimum grade point average (GPA) or other set standard of academic achievement. Students who fail to make SAP will lose eligibility for Title IV aid, which includes student loans.

Should I look for a job now to pay for college?

You could save on debt by working, though you might be quite busy while earning your degree or certificate. Before you decide to work, consider your options. Some studies show that students who work while in college tend to graduate later or not at all. In other words, the stress of working a job and going to school is a recipe for burn-out.